The severity of the UK Government's enormous tax grab on the energy industry in the Budget has been widely criticised.

As was feared, Chancellor Jeremy Hunt yesterday hiked the energy profits levy (EPL) on North Sea oil and gas producers by another 10% to 35% - bringing the overall tax rate from January to an eye-watering 75%.

He has also extended the lifespan of the EPL until March 2028 from the previous date at the end of 2025.

The EPL is now expected to raise a total of £40billion - double the previous figure of £20billion. The total tax take from operators in British waters in the next six years will hit a staggering £80billion.

The chancellor has now been accused of treating the North Sea as a cash cow, and has also been warned that his move will threaten tens of billions of pounds of investment in the basin.

Aberdeen could now find itself landed with the unwelcome title of the tax capital of Europe.

Not good news

But, more worrying for the Granite City, is that oil and gas producers will be forced to look at all possible ways to save on costs after Mr Hunt’s move – and that will not be good news for the north-east economy.

There was also bad news in the Budget for companies generating electricity from nuclear, renewable and biomass sources.

The chancellor had been reported to be lining up a cash raid on these firms - and the actual announcement was worse than expected.

The levy on extraordinary returns from electricity generation will be 45% - 5% higher than what was anticipated.

This tax comes into force in January and runs until 2028, and is expected to raise around £14.2billion.

Ryan Crighton, policy director at Aberdeen & Grampian Chamber of Commerce, said: "It has become impossible to keep up with what the UK Government wants from the energy sector.

Clear signal

"Does it want to increase energy security and accelerate the UK's path to net-zero? Or does it simply want to use the North Sea as a cash cow? Today's £80billion tax raid sends a clear signal that it is the latter.

"The chancellor has ignored explicit warnings from some of the North Sea's most-experienced figures that a 75% tax rate will force them to invest elsewhere.

"And he has also failed to extend the EPL investment allowance to low-carbon technologies like hydrogen and offshore wind farms, a move which could have turbo-charged the energy transition here.

"We should be using these higher energy profits as our deposit on a greener, cleaner future. Instead, the chancellor has chosen to take a blind gamble with a sector that supports over 200,000 UK jobs.

"Aberdeen and its energy sector is again plugging the UK's fiscal deficit - and the bare minimum we should be getting in return is a green freeport in the north-east and the acceleration of support for the Acorn carbon capture and storage project on the Buchan coast.

"We must now hear positive announcements on both of these projects in the months ahead. Anything else will amount to a complete betrayal of this region - and while the rest of the UK is levelling-up, we'll be left levelling-down."

Drive out investors

Offshore Energies UK (OEUK) said the latest tax changes threaten to drive out investors, drive up imports and leave consumers increasingly exposed to global shortages.

The trade body warned that Mr Hunt's move would impact not just North Sea operators but also the hundreds of other companies in their supply chains operating in towns and cities across the UK.

It added that many provide specialised services such as marine engineering, deep-sea diving or subsea communications, and will face cutbacks or being driven abroad if investment declines.

OEUK chief executive Deirdre Michie said it was not just the 75% tax rate that was so damaging.

She added: "It's also the disruption and uncertainty generated by constant changes to our tax system.

"No industry can invest or plan without knowing what kinds of tax regime will be in place. We want to work with the government to build a long-term tax regime that will let us play a full role in the energy transition.

Election cycles

"Unlike politicians, energy companies think and invest in terms of decades - not election cycles."

There was an angry response to the announcement of the electricity generator levy from bodies representing renewable firms in Britain.

RenewableUK is warning that the windfall tax could severely deter investment in much-needed new renewable energy projects.

It pointed out that renewable generators will not be granted any equivalent investment allowances that are available to investors in oil and gas extraction.

The body also highlighted that the new levy will not be applied to gas or coal power plants.

RenewableUK's chief executive Dan McGrail said: "Unlike in oil and gas, under this levy companies which are making significant investments in renewables will get no tax relief and will be hit by a higher windfall rate.

Inexplicably exempted

"Any new tax should have focused on large, unexpected windfalls right across the energy sector, instead profits at fossil-fuel plants are inexplicably exempted from the levy."

Scottish Renewables' chief executive Claire Mack said the UK needs £1.4trillion to fund its transition to net-zero by 2050.

She added: "To raise that money, international investors look to the UK Government to provide a stable policy environment which incentivises investment in clean power.

"The chancellor's announcement damages this country's reputation as a leader in renewable energy - chiefly by continuing to offer investment allowances to oil and gas extraction while failing to do the same for this industry."

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